While plenty of high-yield opportunities exist, investors must always consider the safety of their dividend and the total return potential of their investment. It is not uncommon for a struggling company to suspend high-yielding dividends and subsequently result in precipitous share price declines.
TheStreet Ratings' stock rating model views dividends favorably, but not so much that other factors are disregarded. Our model gauges the relationship between risk and reward in several ways, including: the pricing drawdown as compared to potential profit volatility, i.e. how much one is willing to risk in order to earn profits?; the level of acceptable volatility for highly performing stocks; the current valuation as compared to projected earnings growth; and the financial strength of the underlying company as compared to its stock's valuation as compared to its stock's performance.
These and many more derived observations are then combined, ranked, weighted, and scenario-tested to create a more complete analysis. The result is a systematic and disciplined method of selecting stocks. As always, stock ratings should not be treated as gospel — rather, use them as a starting point for your own research.
The following pages contain our analysis of 4 stocks with substantial yields, that ultimately, we have rated "Hold." Pan American Silver Corporation (NASDAQ: PAAS) shares currently have a dividend yield of 4.10%. Pan American Silver Corp. engages in the exploration, development, and operation of silver producing properties and assets. It produces and sells silver, gold, copper, lead, and zinc. The company has a P/E ratio of 68.11. The average volume for Pan American Silver Corporation has been 2,341,300 shares per day over the past 30 days. Pan American Silver Corporation has a market cap of $1.9 billion and is part of the metals & mining industry. Shares are down 34.5% year to date as of the close of trading on Monday. TheStreet Ratings rates Pan American Silver Corporation as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, feeble growth in the company's earnings per share and disappointing return on equity. Highlights from the ratings report include:
- PAAS's revenue growth has slightly outpaced the industry average of 1.1%. Since the same quarter one year prior, revenues slightly increased by 6.2%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- PAAS's debt-to-equity ratio is very low at 0.02 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with this, the company maintains a quick ratio of 3.12, which clearly demonstrates the ability to cover short-term cash needs.
- 43.20% is the gross profit margin for PAN AMERICAN SILVER CORP which we consider to be strong. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, PAAS's net profit margin of 8.29% compares favorably to the industry average.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 30.72%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 78.72% compared to the year-earlier quarter. Despite the heavy decline in its share price, this stock is still more expensive (when compared to its current earnings) than most other companies in its industry.
- PAN AMERICAN SILVER CORP has exprienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. During the past fiscal year, PAN AMERICAN SILVER CORP reported lower earnings of $0.61 versus $3.01 in the prior year.
- You can view the full Pan American Silver Corporation Ratings Report.
- ARR's very impressive revenue growth greatly exceeded the industry average of 12.1%. Since the same quarter one year prior, revenues leaped by 115.9%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market on the basis of return on equity, ARMOUR RESIDENTIAL REIT INC has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- ARMOUR RESIDENTIAL REIT INC's earnings per share declined by 39.6% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, ARMOUR RESIDENTIAL REIT INC increased its bottom line by earning $0.97 versus $0.02 in the prior year. For the next year, the market is expecting a contraction of 14.4% in earnings ($0.83 versus $0.97).
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 28.74%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 39.58% compared to the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
- You can view the full ARMOUR Residential REIT Ratings Report.
- Compared to where it was 12 months ago, this stock has enjoyed a nice rise of 26.64% which was in line with the performance of the S&P 500 Index. Although VIP had significant growth over the past year, our hold rating indicates that we do not recommend additional investment in this stock at the current time.
- The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Wireless Telecommunication Services industry average. The net income increased by 28.3% when compared to the same quarter one year prior, rising from $318.00 million to $408.00 million.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 2.3%. Since the same quarter one year prior, revenues slightly dropped by 0.5%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- Currently the debt-to-equity ratio of 1.89 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. Along with the unfavorable debt-to-equity ratio, VIP maintains a poor quick ratio of 0.84, which illustrates the inability to avoid short-term cash problems.
- Net operating cash flow has decreased to $1,274.00 million or 20.72% when compared to the same quarter last year. In conjunction, when comparing current results to the industry average, VIMPELCOM LTD has marginally lower results.
- You can view the full VimpelCom Ratings Report.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Diversified Telecommunication Services industry and the overall market, WINDSTREAM CORP's return on equity exceeds that of both the industry average and the S&P 500.
- The gross profit margin for WINDSTREAM CORP is rather high; currently it is at 53.30%. Regardless of WIN's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 3.48% trails the industry average.
- WIN, with its decline in revenue, slightly underperformed the industry average of 0.4%. Since the same quarter one year prior, revenues slightly dropped by 2.5%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- The company, on the basis of change in net income from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and the Diversified Telecommunication Services industry average. The net income has decreased by 13.4% when compared to the same quarter one year ago, dropping from $60.40 million to $52.30 million.
- The debt-to-equity ratio is very high at 8.79 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with this, the company manages to maintain a quick ratio of 0.32, which clearly demonstrates the inability to cover short-term cash needs.
- You can view the full Windstream Ratings Report.
- Our dividend calendar.